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Galaxy Gaming Reports Q-3 Financial Results

Galaxy Gaming Reports Q-3 Financial Results

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LAS VEGAS, Nov. 14, 2016 (GLOBE NEWSWIRE) -- Galaxy Gaming, Inc. (OTC:GLXZ), the world's largest independent developer, manufacturer and distributor of casino table games and enhanced systems, announced today its results for the three and nine months ended September 30, 2016.

Financial Highlights

Q-3 2016 vs. Q-3 2015

  • Revenue of $3,192K increased 16%
  • Adjusted EBITDA of $1,499K increased 68%
  • Pre-tax income of $1,424K increased 569%
  • Net income of $821K increased 586%

Q-3 2016 vs. Q-2 2016

  • Revenue of $3,192K increased 4%
  • Adjusted EBITDA of $1,499K increased 14%
  • Pre-tax income of $1,424K increased 134%
  • Net income of $821K increased 117%

9 Months 2016 vs. 9 Months 2015

  • Revenue of $9,240K increased 15%
  • Adjusted EBITDA of $4,041K increased 58%
  • Pre-tax income of $2,569K increased 466%
  • Net income of $1,578K increased 521%

Executive Comments

Gary A. Vecchiarelli, Galaxy’s CFO commented, “We are very pleased with our continued progress in the third quarter.  Our top and bottom lines continue to grow as this quarter represents another record breaking period for our Company.”  Mr. Vecchiarelli added, “We also finished the quarter with almost $2 million in cash.  The refinancing transaction has changed the financial profile of our Company and provided us with the working capital and flexibility we need to expand rapidly.”

The Company’s CEO Robert B. Saucier added, “When reporting our results, it’s always a pleasure to simply say, ‘the numbers speak for themselves.’  But beyond our Company’s fiscal performance, what excites me most are the investments we are making to stimulate a compelling future.  The majority of our increased cash flow is being re-invested to develop new innovative products and to escalate our sales and marketing activities.  These considerable investments should beneficially increase revenues, profits and cash flow commencing in 2017 and continuing into at least 2018.”

Financial Summary

Revenue.  Total revenue for the third quarter 2016 increased 16% to $3,191,969, over the same quarter 2015.  This increase is primarily due to additional placement of premium games and expansion into new territories.  Between the third quarter 2016 and second quarter 2016, total revenues increased 4% to $3,191,969.  This increase was recognized in all categories of products, with premium games netting the largest gains.  The annualized recurring revenue run-rate as of September 30, 2016 is $12,767,876.

Total costs and expenses.  Expenses for the third quarter 2016 decreased 6% to $2,153,371, when compared to the same quarter 2015.  The decrease is primarily due to decreased legal and professional fees.  The total costs and expenses in the third quarter 2016 decreased 2% to $2,153,371 compared to the second quarter 2016, primarily driven by decreased legal and professional fees. 

Adjusted EBITDA.  Adjusted EBITDA, a non-GAAP financial measure (described below), for the third quarter 2016 increased 68% to $1,499,213, compared to the same quarter 2015.  Increased gross revenues and lower selling, general & administrative expenses contributed to the increase in Adjusted EBITDA between the periods.  Adjusted EBITDA in the third quarter 2016 increased 14% to $1,499,213 compared to the second quarter in 2016.  This increase was also driven by the combination of an increase in gross revenues and a decrease in selling, general & administrative expenses.  The decrease in selling, general & administrative expenses was primarily driven by lower legal costs attributed to litigation.

Net income.  Net income for the third quarter 2016 was $820,972, which was an increase of 586% from the same quarter 2015.  The increase was primarily due to the increases in our recurring revenues and lower costs and expenses.  The net income of $820,972 in the third quarter increased 117% compared to the second quarter 2016.  This increase was the combined result of increased revenues and decreases in selling, general & administrative expenses, for reasons previously mentioned.

Use of Non-GAAP Measures

Galaxy Gaming, Inc. (the “Company”) prepares its consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP").  In addition to disclosing financial results prepared in accordance with GAAP, the Company discloses information regarding Adjusted EBITDA, which differs from the term EBITDA as it is commonly used.  In addition to adjusting net income (loss) from continuing operations to exclude taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes noncash charges, certain non-recurring charges and share-based compensation expense.  EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP.  However, Adjusted EBITDA is used internally in planning and evaluating the Company's operating performance.  Accordingly, management believes that disclosure of this metric offers investors, bankers and other stakeholders an additional view of the Company's operations that, when coupled with the GAAP results, provides a more complete understanding of the Company's financial results.

Adjusted EBITDA should not be considered as an alternative to net loss or to net cash used in operating activities as a measure of operating results or of liquidity.  It may not be comparable to similarly titled measures used by other companies, and it excludes financial information that some may consider important in evaluating the Company's performance.  A reconciliation of GAAP net loss from continuing operations to Adjusted EBITDA is included in the accompanying financial schedules.

About Galaxy Gaming

Headquartered in Las Vegas, Nevada, Galaxy Gaming (galaxygaming.com) develops, manufactures and distributes innovative proprietary table games, state-of-the-art electronic wagering platforms and enhanced bonusing systems to land-based, riverboat, cruise ships and online casinos worldwide.  Through its iGaming partner Games Marketing Ltd., Galaxy Gaming licenses its proprietary table games to the online gaming industry.  The Company is also expanding its global presence through its partnership with WPT Enterprises, Inc., owner of the World Poker Tour.  Galaxy’s games can be played online at FeelTheRush.com.  Connect with Galaxy on Facebook, YouTube and Twitter.

This press release may contain "forward looking" statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and is subject to the safe harbors created thereby.  Forward looking statements are subject to change and involve risks and uncertainties that could significantly affect future results, including those risks detailed from time to time in the Company's filings with the Securities and Exchange Commission.  Although the Company believes any expectations expressed in any forward looking statements are reasonable, future results may differ materially from those expressed in any forward looking statements.  The Company undertakes no obligation to update the information in this press release except as required by law and represents that the information speaks only as of today's date.

 
GALAXY GAMING, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
             
ASSETS   September 30,
2016
    December 31,
2015
 
Current assets:                
Cash and cash equivalents   $ 1,823,657     $ 570,623  
Restricted cash     87,850       97,859  
Accounts receivables, net allowance for bad debts of $27,190 and $30,944     1,937,343       1,828,669  
Inventory     484,442       411,700  
Deferred tax asset           43,017  
Prepaid expense and other     99,905       108,827  
Total current assets     4,433,197       3,060,695  
Property and equipment, net     244,896       298,877  
Products leased and held for lease, net     204,467       134,485  
Goodwill and other intangible assets, net     13,235,698       14,352,636  
Deferred tax assets, net           82,562  
Other assets, net     299,918       41,793  
Total assets   $ 18,418,176     $ 17,971,048  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 563,445     $ 1,421,848  
Accrued expenses     976,834       823,964  
Income taxes payable     1,106,600       170,331  
Deferred revenue     870,628       717,690  
Jackpot liabilities     91,602       106,671  
Deferred tax liability     75,358        
Deferred rent, current portion     12,753       6,197  
Current portion of long-term debt and capital lease obligations     909,009       4,707,316  
Total current liabilities     4,606,229       7,954,017  
Deferred rent, net     42,532       52,643  
Capital lease obligations, net of current portion     54,898       78,008  
Warrant liability     806,698        
Long-term debt, net     9,028,235       7,436,171  
Total liabilities     14,538,592       15,520,839  
Commitments and Contingencies                
Stockholders’ equity                
Preferred stock, 10,000,000 shares authorized, $.001 par value;
  0 shares issued and outstanding, respectively
           
Common stock, 65,000,000 shares authorized; $.001 par value;
  39,315,591 and 39,215,591 shares issued and outstanding, respectively
    39,316       39,216  
Additional paid-in capital     3,054,847       2,963,841  
Accumulated earnings (deficit)     785,421       (792,446 )
Accumulated other comprehensive income           239,598  
Total stockholders’ equity     3,879,584       2,450,209  
Total liabilities and stockholders’ equity   $ 18,418,176     $ 17,971,048  
                 


GALAXY GAMING, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
         
    FOR THE THREE MONTHS ENDED
September 30,
  FOR THE NINE MONTHS ENDED
September 30,
      2016       2015       2016       2015  
Revenue:                
Product leases and royalties   $ 3,190,823     $ 2,747,774     $ 9,229,815     $ 8,003,469  
Product sales and service     1,146       7,074       10,425       18,073  
Total revenue     3,191,969       2,754,848       9,240,240       8,021,542  
Costs and expenses:                
Cost of ancillary products and assembled components     26,763       22,890       78,075       70,168  
Selling, general and administrative     1,576,480       1,736,024       4,850,785       4,995,984  
Research and development     89,513       101,822       270,734       371,251  
Depreciation and amortization     419,540       416,918       1,252,860       1,251,614  
Share-based compensation     41,075       17,909       91,006       72,850  
Total costs and expenses     2,153,371       2,295,563       6,543,460       6,761,867  
                 
Income from operations     1,038,598       459,285       2,696,780       1,259,675  
                 
Other income (expense):                
Settlement income     697,214             697,214        
Interest expense     (227,632 )     (248,604 )     (741,045 )     (799,407 )
Loss on extinguishment of debt     (87,578 )           (87,578 )      
Change in estimated fair value of warrant  liability     2,933             2,933        
Interest income     56       2,084       202       13,288  
Total other income (expense)     384,993       (246,520 )     (128,274 )     (786,119 )
Income before provision for income taxes     1,423,591       212,765       2,568,506       473,556  
Provision for income taxes     (602,619 )     (93,059 )     (990,639 )     (219,418 )
Net income   $ 820,972     $ 119,706     $ 1,577,867     $ 254,138  
                 
Net income per share, basic and diluted   $ 0.02     $ 0.00     $ 0.04     $ 0.01  
                 
Weighted-average shares outstanding:                
Basic     39,315,591       39,040,775       39,372,944       39,040,775  
Diluted     39,465,676       39,079,102       39,559,494       39,079,102  
                                 


GALAXY GAMING, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
       
    FOR THE NINE MONTHS
ENDED
September 30,
 
    2016     2015  
Cash flows from operating activities:                
Net income   $ 1,577,867     $ 254,138  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     1,252,860       1,251,614  
Amortization of debt issuance costs and debt discount     136,710       156,474  
Provision for bad debt expense           40,000  
Inventory reserve           47,069  
Loss on extinguishment of debt     87,578        
Change in estimated fair value of warrant liability     (2,933 )      
Deferred income tax provision     54,370       219,418  
Share-based compensation     91,006       72,850  
Changes in operating assets and liabilities:                
Decrease in restricted cash     10,009       9,392  
Increase in accounts receivable     (107,969 )     (197,139 )
Decrease in other current assets     43,017       62,314  
Increase in inventory     (181,319 )     (125,820 )
Decrease (increase) in prepaid expenses and other current assets     6,608       (65,538 )
(Decrease) increase in accounts payable     (858,954 )     495,891  
Increase in income taxes payable     936,269        
Increase in accrued expenses     141,841       23,037  
Increase in deferred revenue     152,938       65,227  
Decrease in jackpot liabilities     (15,069 )     (6,296 )
Decrease in deferred rent     (3,555 )     (957 )
Net cash provided by operating activities     3,321,274       2,301,674  
Cash flows from investing activities:                
Acquisition of property and equipment     (43,345 )     (44,980 )
Cash flows from financing activities:                
Proceeds received from long-term debt     932,126        
Principal payments on capital lease obligations     (51,698 )     (49,186 )
Principal payments on long-term debt     (2,873,437 )     (2,662,699 )
Net cash used in financing activities     (1,993,009 )     (2,711,885 )
Effect of exchange rate changes on cash     (31,886 )     (1,962 )
Net increase (decrease) in cash and cash equivalents     1,253,034       (457,153 )
Cash and cash equivalents – beginning of period     570,623       560,184  
Cash and cash equivalents – end of period   $ 1,823,657     $ 103,031  
Supplemental cash flow information:                
Cash paid for interest   $ 753,250     $ 800,830  
Inventory transferred to leased assets   $ 108,577     $ 39,896  
Cash paid for income taxes   $ 35,000     $  
Supplemental non-cash financing activities information:                
Effect of exchange rate on long-term debt payable in foreign currency   $ 336,485     $ 119,414  
Issuance of warrants in conjunction with term loan   $ 809,631     $  
Points paid on term loan   $ 262,500     $  
                 


GALAXY GAMING, INC.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited)
               
    Three Months Ended
September 30, 
  Nine Months Ended
September 30,
  Three Months Ended
June 30,
 
      2016       2015       2016       2015       2016  
Net income   $ 820,972     $ 119,706     $ 1,577,867     $ 254,138     $ 377,527  
Interest income     (56 )     (2,084 )     (202 )     (13,288 )     (90 )
Interest expense     227,632       248,604       741,045       799,407       255,218  
Income tax provision     602,619       93,059       990,639       219,418       231,057  
Depreciation and amortization     419,540       416,918       1,252,860       1,251,614       417,344  
Share based compensation     41,075       17,909       91,006       72,850       29,459  
Loss on extinguishment of debt     87,578             87,578              
Change in estimated fair value of warrant liability     (2,933 )           (2,933 )            
Gain on settlement     (697,214 )           (697,214 )            
Adjusted EBITDA(1)   $ 1,499,213     $ 894,112     $ 4,040,646     $ 2,584,139     $ 1,310,515  
                                         

(1) Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, taxes, depreciation, amortization, share-based compensation, and non-cash charges.  Adjusted EBITDA does not purport to represent net earnings or net cash used in operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to such measurements or as indicators of the Company's performance.  The Company's definition of Adjusted EBITDA may not be comparable with similarly titled measures used by other companies.

Contact:
Gary A. Vecchiarelli
(702) 939-3254

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Source: Galaxy Gaming, Inc.